Real Issues No. 347 - Minor parties, Raise GST, Book review

Maxim Institute - Real Issues - No. 347

28 August 2009

www.maxim.org.nz

We beg to differ

Focus more on GST

The straight-shooting Cardinal

WE BEG TO DIFFER

It's important for minor parties that they don't get drowned out in

Parliament. Against this backdrop, disagreement over whether the new

Auckland Super City Council should have two separate Maori seats tested the

relationship between the National Party, the ACT Party and the Maori Party

this week. The conflict arose when ACT leader and Local Government

Minister, Rodney Hide, refused to sponsor the Super City legislation and to

resign his post if it contained a proposal for seats reserved exclusively

for Maori. Hide acted in accordance with ACT Party principle, which opposes

separate racial or ethnic representation. This is at odds with both the

Royal Commission's recommendations and the wishes of the Maori Party.

Hide's stance shows the dynamics of MMP government at work; in particular,

how smaller parties can--indeed must--take a different stand to others on

some major policy issues, even when they have an arrangement to work

together.

When National came to power it followed the precedent Labour had set,

negotiating quite flexible support agreements. These arrangements allow

senior MPs of minor parties, like Hide and Maori Party co-leader Dr Pita

Sharples, to hold ministerial positions but also to have the freedom to

disagree with the Government on issues core to their values. Most of the

time, party positions are clear from the outset and when conflict arises

issues can be worked through to reach an agreeable compromise. However,

occasionally an issue like the Maori seats flares up, pitting party against

party, creating headaches for whoever is the Prime Minister as they have to

find a way through. This case was especially difficult for Prime Minister

John Key because two important support partners squared-off against each

other because of very distinct and cherished positions.

Smaller parties like ACT and the Maori Party actually depend on disagreeing

with the major parties and each other, to retain an independent identity.

It's their distinctive identity that differentiates them to voters when it

is time to go to the polls. When smaller parties actually get into power,

the job of 'brand differentiation' is even more important since there is a

risk that being part of the Government causes them to lose their

distinctiveness. This may partly explain why Hide decided to take a stand

on the issue of the Maori seats. ACT's re-election rests on defending the

principles its voters supported, and on holding and increasing its share of

the vote. It can't afford to merge into National in the voters minds.

At the same time it is important that these parties keep their heads about

them. It is in the public interest that we have a stable government and

ultimately an MP's responsibility is not exclusively to their party but to

the good of the whole nation who they have been elected to represent.

Choosing when and how to dissent is a tension that must be carefully

handled. The political management of all this is difficult, but at the same

time we should respect parties like ACT and the Maori Party when they stand

on their principles, even as they seek to govern together.

FOCUS MORE ON GST

For a better tax system, change the tax mix. In other words, raising the

GST rate and lowering personal income and corporate taxes, would be good

for the economy and fairer too. It would also help to make New Zealand's

tax base--the sources of government revenue--more secure. On this subject,

a paper has been released by the Government-appointed Tax Working Group,

examining what the consequences might be of relying more on GST.

Research continually shows that high top marginal tax rates, like our 38

percent personal income tax rate, are damaging to economic growth. They cut

into people's and business' incentives to save, invest, work or start an

enterprise, activities that will boost economic growth. For instance, many

wonder, what's the point in working harder and earning more, if that money

just disappears in tax? Unattractive tax rates are a serious problem right

now for New Zealand, with 24 percent of our skilled workforce overseas, and

foreign companies investing in places with lower tax rates, denying us

valuable capital in the credit-short market. Relying more on GST would

potentially help us to lower the taxes which are most harmful to growth.

GST is also fairer than our current personal income taxes, as it treats

everyone in the same way. Another major benefit of greater reliance on GST

is that it's difficult to avoid paying. At the moment, many people are

finding ways to side-step their personal income taxes by sheltering income

in trusts or companies. Paying your tax along with each purchase at the

check-out is much more difficult to avoid. We should take more advantage of

GST because it is a reliable revenue source.

One criticism that is made about raising GST is that it might hurt

low-income earners who would find themselves contributing to a bigger chunk

of the government's revenue than they currently are. While this cannot be

avoided, short-term inequalities could be partly addressed with cash

benefits. In the long-term it is likely that this would not pose a problem,

as over a lifetime GST is likely to collect the same proportion of tax from

the majority of people. For the sake of New Zealand long-term, the

Government should actively consider the Tax Working Group's recommendation

to rely more on GST.

Read Maxim Institute's media release

http://www.maxim.org.nz/index.cfm/Media/article?id=1919

Read 'Changing the Rate of GST' by the Tax Working Group

http://www.victoria.ac.nz/sacl/CAGTR/taxworkinggroup/session-two/TWG%20GST%20paper%20for%20website.pdf

THE STRAIGHT-SHOOTING CARDINAL

George Pell, the Cardinal Archbishop of Sydney, has a reputation as a

straight shooter. His collection of essays, God and Caesar, offers a series

of rigorous and sometimes elegant meditations on democracy, freedom,

society, social order and the role the Catholic Church can and should play

in the modern world. Fortified by a strong sense of history, Cardinal Pell

unites confidence in his own tradition with a suppleness of mind. He is

able to speak clearly and bravely to a twenty-first century that is

increasingly tormented and unstable.

Rather than promoting 'the absolute pursuit of the autonomy of the

individual,' the Cardinal advocates for a more holistic view of democracy.

Quoting George Weigel, he points out that 'a genuinely human society

flourishes when people dedicate the exercise of their freedom to the

defence of others' rights, and the pursuit of the common good, and when the

community supports individuals as they grow into fully mature humanity.'

That is, democracy flourishes when it is directed to moral ends. People

flourish when they are attuned to transcendence, sacrifice, and the

challenges of moral order.

The book contains other gems on an array of subjects. Superbly literate,

historically aware, and above all, brave, Cardinal Pell lays down a tough,

unfashionable, and vital challenge--where to for democracy? Where are we

going? What provides the moral engine, the driving force behind our body

politic? Cardinal Pell puts his finger on tough questions that must be

answered. Drawing on the best of Catholic teaching, yet accessible to

people of goodwill everywhere, God and Caesar goes to the root of what it

means to be human--and how that is lived out in a democracy.

ends

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